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• Last Updated November 19, 2023

Construction Monitor October 2023

In this month’s monitor we look at the manufacturing production capacity of cement and aggregates that has underperformed against the overall manufacturing production capacity across all sectors, with a decline of 2 percent y-y in Q3. Mining production of building materials was also lower after a robust increase in Q2. Trends in the retail and wholesale trade sales of construction materials remain on a similar trajectory, with retail sales continuing to decline, against higher sales at wholesale level. Construction material price inflation remained at the more elevated level of 6 percent, above the average consumer inflation of 5.4 percent in September 2023. Core building materials, like cement, bricks, tiles and sand are still rising by double digit increases, while reinforcing steel has shown a notable decline. The robust decline in approvals for private sector construction continued in August and although an uptick in approvals for office space offers some growth opportunities in selected areas, the overall impact on the building sector will be profound.  The outlook for economic infrastructure development remains positive, with turnover in the civil industry expected to improve. The value of projects that have been awarded supported by a stronger pipeline is positive for the civil sector. It was also encouraging that National Treasury did not introduce significant cuts to the infrastructure budget in the Medium Term Budget Policy Statement (MTBPS) announced in November, with no changes announced in the budgetary allocations to expenditure on buildings and other fixed structures. The big unknown however is proposed changes to conditional grants, with the 2023/24 budget cut by R9.6bn and more significant changes expected to be announced in the 2024 Budget. Also included in this month's report is a look at local government capital expenditure and the latest trends in public sector social housing developments.

The listed sector experienced a more difficult month in October, with 86 percent of the companies that we monitor across contractors, retailers, suppliers and property funds, having reported lower market capitalisation values.  Sephaku Cement and Italtile were the only two companies that showed stronger market cap values.  Overall, all the indices weakened in October, apart from the retailer’s index that was pulled higher by Italtile.

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